The Sydney suburbs set to defy the odds in 2026

While Sydney’s property market will grow more slowly than those of other capital cities in 2026, some suburbs will buck the trend and see significant returns, according to a recent report.

Rising interest rates and low buyer confidence will likely see Sydney’s dwelling prices “tread water” in 2026, according to a recent report from mortgage brokerage Shore Financial.

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Data from Shore Financial’s State of Sydney Report found that Sydney’s housing market was likely to experience minimal growth over the six months to August.

Shore Financial CEO Theo Chambers said rising interest rates would continue to have a significant impact on the property market, lessening the number of buyers with the capital to compete by reducing borrowing capacity.

“The Reserve Bank of Australia lifted the cash rate in February and has signalled that at least one further increase may occur this year,” Chambers said.

“Higher rates directly reduce how much buyers can borrow, which in turn caps their ability to bid up prices.”

While the increased cash rate will restrict the amount that buyers can borrow, Chambers said it will also decrease buyer confidence.

“When buyers believe rates may rise again, they become less bullish.”

“They are less inclined to stretch themselves or submit aggressive offers, partly because they assume competing buyers will also be more cautious.”

Chambers said the impact of the rate rises often caused a significant shift in the psychology of potential buyers.

“The power of sentiment in the property market can sometimes be more impactful than the actual commercial effect of the rate rise.”

“Speculation about future rate rises is then factored into their commercial decisions, even before those rises occur.”

“That collective pullback in confidence can take the heat out of the market quite quickly.”

Additionally, Chambers said the Sydney property market was already close to affordability limits for many households, which reduced the number of prospective buyers able to participate.

The report found a modest increase in listing numbers, with fewer participants slowing the rapid growth seen across other capital cities.

“While supply is not excessive, the slight life in available stock gives buyers more choice and negotiating power than they had during tighter conditions.”

Although the report forecasted modest citywide growth, Chambers said that certain “pockets” were poised to outperform, driven by above-average buyer demand and declining inventory.

“These metrics are reliable leading indicators over a six-month horizon, as tightening supply and faster selling conditions typically precede growth.”

“The key takeaway is that while Sydney’s overall market may tread water in the near term, selective opportunities remain for buyers who focus on local fundamentals rather than headline averages,” Chambers concluded.

Here are the top 10 suburbs tipped for growth:

Silverdale

Median house price: $1.4 million